Long investors who own Chinese e-commerce, tech and education stock in their portfolios have had their guts checked, hearts ripped out and their peace of mind called into question time and time again in 2021.
For the uninitiated, share prices of several Chinese companies have suffered marked weakness in 2021 caused by regulatory concerns and also concerns over the U.S.-China relationship.
Moreover, some investors may fear Chinese stocks being delisted from U.S. exchanges.
Delisting refers to the process by which a listed security is removed from an exchange on which it is traded. There are no confirmed reports that such delistings of Chinese stocks, on U.S. exchanges, are in the process of being executed by U.S. officials.
Another sharp downward catalyst for Chinese stocks in 2021 was the June 30 IPO of ride-hailing giant DiDi Global Inc – ADR (NYSE: DIDI). Reuters reported on July 6 that Chinese regulators ordered the company’s app to be taken down days after its $4.4-billion listing on the New York Stock Exchange.
The list of targeted sectors goes on, and among the hardest-hit industries is the Chinese education sector. Chinese education names dipped heavily in July following a policy from the Chinese government that may force for-profit education companies to become nonprofits.
For context, as bad as Alibaba Group Holding Ltd – ADR’s (NYSE: BABA) performance has been over the last year (down 41.47%), investors in Chinese tutoring giants TAL Education Group (NYSE: TAL) (-93.3%) and New Oriental Education & Tech Grp (NYSE: EDU) (-84.69%) have it worse.
Using $10,000 to short sell Alibaba, Nio Inc – ADR (NYSE: NIO), ContextLogic Inc (NASDAQ: WISH), TAL Education and New Oriental Education, here’s how the returns* break down on a short position opened June 30 and closed on Sept. 1:
|
Stock |
June 30 SP |
September 1 SP |
P/L On Short Sale |
|
Alibaba |
$226.78 |
$173.28 |
+$2,359 |
|
Nio |
$53.20 |
$39.08 |
+$2,654 |
|
ContextLogic (WISH) |
$13.17 |
$7.38 |
+$4,396 |
|
New Oriental |
$8.19 |
$2.35 |
+$7,131 |
|
TAL Education |
$25.23 |
$5.32 |
+$7,891 |
*Less applicable borrowing fees and commissions
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